Smartphone & Mobile trends: Mobile Search Will Be King

October 14, 2009 · Print This Article

Below is some market research we’ve pulled together about mobile and smartphones specifically:

Coda Research Consultancy in a new report forecasts mobile broadband search and display ad revenues in the US to grow to $4.2 billion in 2015, up from $1 billion in 2010.

The firm predicts that 70% of those revenues – or nearly $3 billion – will come from search advertising, and sees a bright future for local search in particular. SMS revenues on the other hand are forecasted to drop to a mere 3% in the next 5-6 years, down from 55% in 2010.

As we’ve noted before, most reports from research agencies predict a steep rise of revenues from mobile search in the coming years, and I’m bullish about that too, but Coda seems overly optimistic about the general growth curve in its forecasts. I also don’t believe revenues from SMS, which continues to be one of the cheapest, quickest and easiest to use form of peer-to-peer mobile communication, will really decrease so rapidly. Mobile advertising isn’t a zero-sum game.

A couple of weeks ago, eMarketer reached more conservative conclusions based on its own research, estimating that mobile ad spending, including messaging-based formats, will reach $416 million in 2009 and $1.56 billion by 2013. The Kelsey Group forecasts U.S. mobile advertising revenues (search and display) to grow to $3.1 billion by then.

The consensus, however, seems to be that SMS revenues are set for a decline in the next five years, and that the increase in mobile advertising revenue from search and display will compensate for that decline and continue to make the segment grow faster than regular Internet advertising.

WIth the rise of Web phones like the iPhone, Android, Blackberry, and Palm (Verizon’s CEO says that 40% of its new phone sales are such smartphones), mobile advertising promises to be a huge growth area. The Kelsey Group, a market research firm, projects that the mobile advertising market will balloon from $160 million in 2008 to $3.1 billion in 2013.

Of course, that is just an educated guess which will turn out wrong. But there is no doubt that mobile advertising will be much bigger in four years, perhaps even ten to 20 times bigger than it is today. Where will all of that mobile ad money go to? Here I think the Kelsey group is more on target. It projects that mobile search will go from 24 percent of the total mobile ad market last year to 73 percent of the much larger pie in 2013, according to a recent research note put out by Citi analyst Mark Mahaney, which is where I’m getting all of these numbers.

Display ads are projected to go from 13 percent of the total to 18 percent, while SMS ads will decline as a percentage from 63 percent to 9 percent (see charts). So once again it looks like search is going to be the big winner. No wonder Google is so focused on mobile search as one of its major sources of growth.

Think about it. Display ads take up precious real estate on your phone screen and tend to just get in the way and be an annoyance. That’s why most people don’t like them. But when you are doing a search on your phone, you are often looking for something nearby—a store, a restaurant, a dry cleaner. You are more open to ads, especially if they are relevant to your search.

Mobile search is particularly tuned for local search ads. Mahaney writes:

Given the nature of mobile devices, local queries on mobile should, over time, be greater than local queries on the desktop.

Indeed, the Kelsey Group predicts that local searches will rise from 28 percent of all mobile searches in 2008 to over 35 percent by 2013. And as a percentage of mobile search ad revenues, local search is already half. That is a $1.27 billion market opportunity in four years just for local mobile search.

So who would you rather be: Google or some random mobile ad network shoving display ads into apps and mobile browsers?

Mobile Ad Spending to Gain Momentum

SEPTEMBER 23, 2009

Higher growth rates in 2010–2011

Despite the rising number of mobile users and their increasingly sophisticated habits and mobile devices, advertising and marketing dollars flowing to mobile lag behind consumer usage of the channel. But long-term growth trends are positive. Spending on mobile advertising is set to increase rapidly over the next five years.

eMarketer estimates that mobile ad spending, including messaging-based formats, will reach $416 million in 2009, increasing to $1.56 billion by 2013.

“As an emerging advertising channel, mobile will continue to see lofty growth rates through 2013,” said Noah Elkin, eMarketer senior analyst and author of the new report, “Mobile Advertising and Marketing: Change Is in the Air.” “Mobile will grow considerably more quickly than online ad spending as a whole, more in line with emerging online formats such as digital video.”

Like many research firms have done in the past year, eMarketer has revised downward its projections for mobile advertising in the US to account for the realities of the global economic downturn. But based on extensive interviews with marketers and agency executives, the overall long-term outlook for mobile remains optimistic.

Estimates for mobile ad spending span a broad range. At the low end, Yankee Group predicts $184 million in 2009 spending, while the Mobile Marketing Association forecasts spending will reach $1.7 billion this year. This disparity reflects the relative immaturity of the channel, particularly for non-messaging-based advertising and marketing formats.

In terms of spending share for various mobile formats, eMarketer foresees a rise for search, from 18% ($57.6 million) of the total in 2008 to 37% ($577.2 million) in 2013. Over the same time period, eMarketer also projects a decline in share for SMS, from 60% of the total ($192 million) to 28% ($436.8 million), while display will grow from 22% ($70.4 million) to 35% ($54.6 million).Of all mobile ad formats, eMarketer believes search will see the steepest growth through 2013, yielding a CAGR of 58.6% between 2008 and 2013.

“Disparate hardware and software platforms, competing app stores, rival search engines and a large, fragmented universe of agencies and service providers make the mobile ecosystem more daunting than the desktop environment,” said Mr. Elkin. “But overcoming this complexity pays dividends.”

Mobile has an additive effect on other advertising and marketing efforts, and can bridge the gap between digital and traditional campaigns. It is also flexible, lending itself to both direct response and brand reinforcement and awareness campaigns.